All Forum Posts by: Nahal Beckam

 You probably cannot. 

That is not correct. It is not an option. You have to follow the rules to report the activity as passive vs non-passive. 

@Nahal Beckam So I actually work as a lender and tell people the APR is not really that important because your cost of doing the loan are part of the APR but are only at the beginning of the loan. You just need to consider your total interest pain on the life of the loan and how long you expect to keep the loan. If you keep it forever and pay off the loan then get the lower interest rate.

With your two options 

A: 650K @ 2.75% on a 30 year fixed rate note = $2653.57 p&i monthly payment. 

Lifetime interest is $305284

B: 650K @ 2.875% on a 30 year fixed rate note = $2696.80 p&i monthly payment. 

Lifetime interest is $320848

The difference in the monthly payments is $43.23. Assuming you loans are the same starting balance and you pay all the closing costs up front (which is the lowest cost way to do it) You pay ($1450-$400) $1050 more for the 2.75% rate and you will break even at ($1050/43.23) 24.28 months. As long as you provided accurate costs and keep the loan more than 2 years the lower interest rate is better. 

@Nahal Beckam you are going to have a hard time finding a bank that will refinance your property at the same LTV during this time. Many banks are lowering their LTV as low as 65%, requiring 6 months of mortgage payments in escrow, etc. I would wait it out a little bit until this COVID-19 pandemic settles down a little bit. Maybe try reaching out to a few brokers.

I would not wait until July 1st before collecting something.  It's still only May.  That is way too long to take a property off the market and hold it for someone without that person having some skin in the game.  If they don't have any money invested, it's too easy for them to change their mind and walk away and then you held it all that time for nothing.

You should at least collect the first months rent.  You could collect the whole thing if you want to make sure they have it, but if they ended up not moving in you'd still have to try and mitigate your losses and attempt to re-rent it so it's not like you'd get to keep it all anyway.  

Another option is to do what I do and collect a non-refundable "holding fee" that holds the property for them until the start of the lease.  Prior to the start of the lease, they have to pay all remaining money owed and start utilities in their name.  If they don't do everything required of them, they forfeit the holding fee as liquidated damages and the lease is cancelled and the property will be re-listed.  (All of this is fully explained to them beforehand.)  However, if they do everything required of them, the holding fee converts to their security deposit and they get to move in.

If you go with the holding fee option, just don't call it a non-refundable security deposit when you initially collect it because there is no such thing in California.  (All security deposits by their very nature are refundable.)